The Indonesian government is planning to roll out a new investment vehicle, titled Merah Putih Fund, in December to invest in homegrown mature startups as part of efforts to tap into the burgeoning tech ecosystem, a top executive told DealStreetAsia.
The fund will be set up in partnership with the venture capital units of Indonesia’s top state-owned enterprises including Telkom Group, Bank Mandiri and Bank BRI, among others. The fund will draw capital from the various state-owned enterprises.
The fund has already made its first close at a “few hundred million US dollars,” said sources. The total targeted corpus of the fund could not be ascertained yet.
The fund plans to invest in growth-stage funding rounds of Indonesian tech startups with ticket sizes ranging from $10 million to $50 million, MDI Ventures chief executive officer Donald Wihardja told DealStreetAsia.
“We want to give Indonesian founders good business opportunities and also create a channel where startups can also help digitise state-owned enterprises in return,” he added.
The fund, which plans to invest in 10 companies next year, will look at revenue-generating startups that have a listing roadmap, he said.
Corporate venture capital firms with affiliations to state-owned companies such as MDI Ventures (Telkom Group), BRI Ventures (BRI), Mandiri Capital Indonesia (Bank Mandiri), and a few other state-owned enterprises CVCs will be part of the fund.
Mandiri Capital Indonesia declined to comment while BRI Ventures did not respond to a DealStreetAsia query seeking comment.
Merah Putih Fund was first mentioned at a local event last week by the State-Owned Companies Minister Erick Thohir when he addressed the need for backing startups with valuations nearing $1 billion, also known as soonicorns, and unicorns. Merah Putih is literally translated as red and white – the colours of the Indonesian national flag.
Outlining the criteria for investments under the Merah Putih fund, Thohir said last week, “we are launching Merah Putih Fund with three common threads. One, the founders must be Indonesians. Two, the company has to operate in Indonesia. Three, [it should] go public in Indonesia, not in Singapore.”
Thohir also predicted that Indonesia will be home to nearly 25 unicorns in the next few years. The country already has nearly a dozen startups that have earned the tag, the most recent ones being payment gateway Xendit and the wealth tech player Ajaib.
There are others close to achieving the status such as Alpha JWC Ventures-backed coffee chain Kopi Kenangan. Alpha JWC said there will be a couple of new unicorns within its portfolio in 2022 but the VC declined to mention names nor confirm Kopi Kenangan’s unicorn status.
The move to back local startups, Thohir said, is part of an effort to ensure Indonesia’s market potential is cultivated for the nation’s growth. While the minister dismissed anti-foreign [investor] sentiments behind the initiative, he said the digital economy must benefit Indonesians first.
The largest economy in Southeast Asia is home to more than 270 million people with a growing middle class. The country suffered its first recession in over two decades last year as the pandemic-induced restrictions hit consumption and business activities. The country is expected to record a 4% economic growth this year, according to Finance Minister Sri Mulyani’s projection, a swing from the 2.07% contraction in 2020.
In early 2021, Indonesia also introduced its first sovereign wealth fund, a separate initiative that will focus on public infrastructure, supply chain and logistics, digital infrastructure, green investing, healthcare services, financial services, consumer and tech, as well as tourism.
The Indonesian government committed to providing the wealth fund, called INA, with $5 billion capital, of which $1 billion was injected in late 2020, according to the fund’s website. INA aims to grow its assets under management to $20 billion with its investor partners.
While the contours of the Merah Putih are yet to be finalised, in SE Asia, Malaysia has state-linked funds that have a mandate to nurture local startups and founders. Malaysia Venture Capital Management Berhad began with the aim to accelerate the technology ecosystem and provide funding to the unbankable market.
Since 2001, MAVCAP has transformed its operations to developing a VC ecosystem in the country while encouraging innovation and growth of the country’s digital ecosystem, especially among Malay and other indigenous people in Malaysia. MAVCAP recently launched two new venture funds that will invest in technology startups in the country and in SE Asia.